The Fuse
Futures are rising modestly this morning as a lack of news over the weekend is pushing stocks towards resistance. A third day up in a row woul be the first time in over a month but stiff opposition lies ahead.
Interest Rates are a tad higher this morning as the hand-wringing over last Monday’s deep red session continues. It was just a week ago stocks were beaten and battered but that low might actually stand. Yields have been rising since that session too, the 10 year is pressing 4% after making a run down to 3.7%.
The 2 year has pushed back above 4% but it is still reflecting worries in the future over the economy. The yield curve remains slightly inverted. Fed funds futures are now seeing 4 cuts for 2024, yet the Fed is not quite there yet.
Stocks in Europe had nice gains overnight, rising up .4% on good turnover. Asian stocks were mixed with Japan closed for the holiday. gold is up a bit this morning, crude oil higher by more than 1%. The dollar was flat at 98.05 while the german bund 10 year yield was up 2 bps.
Earnings are into phase 3 now but some big names this week report, like Home Depot, Walmart, Cisco, Deere, Alibaba, Applied Materials and Brinker. These are names we should expect to see good earnings and guidance, especially from the retail brands.
July inflation readings will be the focal point this week along with good-sized options expiration Friday. Stocks are trying to buck the recent trend of heavy down sessions and with a downward move on VIX there is good potential.
Breadth finished poorly on Friday but the bulls still have the upper hand. Breadth indicators are still on buy signals, new lows though are still expanding over new highs though that can flip in a matter of weeks. Oscillators are mildly oversold but a 1% up in markets next couple sessions confirms the bulls will regain the advantage.
Volume was light again as the market rallied up to resistance. Is this just a deadcat bounce or something real? We’ll have to see a few more days and if buyers continue to push prices higher on good volume then the trend could change.
Stocks may have found good support at the Monday lows. Those levels though have not been tested and we often see that happen just to make sure there is no more selling underneath. However, the further away price is from those lows the more painful the test downward is going to feel. We do not expect to leave this correction without some sort of retracement towards those Monday lows.
The Internals
What’s it mean?
Chalk it up as a winning day for the bulls but it was far from impressive. Thursday’s rally had followthrough, that would be huge positive for the bulls. But looking at the VOLD and ADD there was little to be excited about. The TICKS were evenly distributed as well, but VIX decline continues, which is driving the price action. Put/calls are trying to make lower levels but protection buyers are active.
The Dynamite
Economic Data:
- Monday:US Budget
- Tuesday:PPI, NFIB optimism
- Wednesday:CPI
- Thursday:Retail sales, jobless claims, industrial production, cap utilization, business inventories
- Friday:Consumer sentiment, housing starts, homebuilder confidence
Earnings this week:
- Monday:ABX, RMBL, MNDY
- Tuesday:HD, MLCO
- Wednesday:EAT, DOLE, CAH, UBS, CSCO, AST
- Thursday:WMT, JD, DE, BABA, AMAT, HRB, COHR
- Friday:FLS
Fed Watch:
Probably a quiet week for the Fed in front of next week’s summer conference in Wyoming, known as Jackson Hole Monetary Meeting. Chair Powell is likely to deliver the keynote speech, where he will likely reiterate the committee’s stance on policy, and probably to pull any surprises. This meeting has often been a place where clues and hints are dropped to the public eye.
Stocks to Watch
Volatility – VIX really spiked last week but has had a crash down move since Monday. With lower VIX comes more confidence from traders and investors. We’ll see if the trend continues this week with some big earnings on tap and inflation data.
July Inflation Data – PPI out on Tuesday, CPI out on Wednesday, Retail Sales on Thursday. Those are the big numbers to focus on this week as they will give us fresh data to help us and the Fed determine the direction on monetary policy.
Retail Earnings – It’s a big week for retail with Home Depot and Walmart reporting their quarter. The charts are not terrific but they both have often surprised to the upside when the worst is expected, like now.
